Do you really want important tips for investing in the stock market?
Read this blog post and you will get some of the most important tips for investing in the stock market.
Investing in the stock market is simple but not that much easy. Simple in the terms that you only have to buy and sell stocks, you do only need to know basic plus-minus multiplication. You can buy stocks with a few simple clicks on your mobile phone.
But investing is not easy because you can buy or sell easily but finding what you should buy is difficult.
The most important thing in the stock market is to find what to buy. There are thousands of stocks out there and finding the best stock for you is very difficult.
To find good quality stock for yourself, you have to do some research. Read books on investing, listen to the greatest investor. Learn from them. Learn Accounting. Accounting helps you understand the business well.
Here are 10 important investing tips for you to invest in the stock market. You can remember these tips while making an investment.
Important tips to investing in Stock
1. Buy Low and Sell High
What! We know that!
It is very basic that you have to buy low and sell high in the stock market to make money.
Then why am I considering it as an essential tip?
It’s not just buying and selling through mobile apps by clicking a few buttons on the screen.
In every buying and selling, there are emotions involved with the investor. It influences their investing decision.
An investor’s buys and sell decisions are mostly influenced by market fluctuation. They buy with a substantial increase in price and sell with a substantial drop in price.
When the price of stocks drops, it’s a great opportunity for investors to buy. But fear starts dominating investors and they end up selling their holdings.
And when the stock price is at an all-time high. Greed starts dominating and they start buying at a high valuation.
While buying and selling, always try to keep your emotions in control and make decisions based on your research.
2. Think Stock As a Company
For every stock, there is the real business behind them.
In the stock market, everyone knows the price of every stock but they do not know the company behind them and the value of the company.
While investing in any Stocks, always keep in mind that you are buying a real business, not just stock.
If you think of stocks as a business then you will behave like an owner of the company. Stock gives you ownership of the company. But we need to think like that. We are just interested in buying and selling stocks.
3. Don’t be an Emotional Fool
We, humans, are emotional creatures. These emotional qualities are often seen in the stock market also. It is recommended to make rational decisions on the stock market, but this is rarely followed in the stock market. We almost always end up making emotional decisions.
We make emotional decisions in buying and selling stocks.
We buy when we have to sell and end up selling when there are buying opportunities.
4. Research well before you invest
If you are investing on your own then you must do your research before investing in any stocks or shares.
There is information available everywhere. You can just do a few clicks online and every type of information is at your fingertips.
you can get every information about the company online. There are websites like Screener. in, Moneycontrol.com, StockEdge.com, investing.com, and many more where you can get all the information about the company.
With these websites, you can do both technical and fundamental analysis.
SO use these websites and make an informed decision towards investment.
For technical analysis, you can also use the website Tradingview.com. Here you will get excellent Charts and Indicators.
5. Hold stocks for long-term
The stock market in the long term is like a weighing machine, and in the short term, it’s like a voting machine. You can’t predict the stock market in the short run. But you can make good predictions in the long run.
To get higher returns in the long term, you have to have stocks in your portfolio for a long time. To have stock in your portfolio for log, you have to hold stock for long. Long-term investing has its own benefits like you don’t have to worry about the daily price fluctuation in the stock market. You don’t have to look at how your portfolio is performing daily.
Long-term investors sleep well because they don’t have any tension about their investment. They know that they have done good research and their chosen stock will perform better in the long term.
6. Learn the power of compounding
For an investor, It is very much important that you learn the power of compounding. Learning how compounding works and what it can do with your money is very important.
In the Compound interest formula, two terms are important, one is the Interest rate and the second is Time.
Here time is very important, in the formula it is exponential. and here only the magic happens.
Do the math with different values in the calculator and see the magic.
Rule Of 72
The Rule of 72 formula is also very important in the investing world.
The formula is this:
Number of Years to Double your money= 72/ Interest rate.
Example: If you 12% return on your money then 72/12 is 6. Means it takes 6 years to double your money. suppose you have Rs 200000 in 2021 and you are getting a 12% annual return on your investment, then in 2027, your 200000 investment will become 400000.
Do the math by changing the interest rate and look at how many years you are going to double your money.
You can change the equation by taking a year divided by 72. In this, you enter the Year and it will give you the interest rate on which you will double your money in a given year.
7. Learn from the best Investors in the world
Investing is not much technical, it’s more subjective and philosophical.
In this era of overflowing information, you can learn just anything on your own. Just by reading books and talking to people.
You can also learn about investing from the best investors in the world. you can read the books written by them or written on them. You can learn by watching their interviews on YouTube.
You can learn much more by Reading Berkshire Hathaway Shareholders Letter Written By Warren Buffet than you can learn in an MBA in College.
8. Portfolio allocation is important
Portfolio allocation is also an important and crucial step in investing. Making decisions on how much allocation you should make on particular stocks is sometimes very confusing. And one bad allocation and make and break your investment Returns.
I also struggle with portfolio allocation.
So learn portfolio allocation together and comment on your strategies in the comment below.
Let’s make it interactive. The first comment in the comment section is my view of Portfolio allocation.
What’s Yours! Comment below.
9. Learn Accounting
Warren Buffett once said that Accounting is a Language of Business. If your goal is to learn the business and start investing in the stock market, then you have to learn Accounting. Accounting is not that hard, there are different types of accounting, one for managers and business purposes and one for investors, those for investors are not that much hard to grasp.
There is very limited accounting knowledge required for an investor. The investor is just finding a good company to invest in. He is not who is going to create the audit for the company. So you don’t have to worry much about accounting. Just learn the basics and it will be fine for an investor.
Related Reading: Difference between Investing and Trading.
10. Don’t borrow to Invest
The stock market is full-on Uncertainty. You will not be able to predict the stock market and any point in time. The stock market is also very Volatile. the Time you put your money into the share market, it can go down by 10% the next day. and also can go up by 10% the next day.
The Stock market is Very irrational in the Short Term. And is reasonably rational in the Long Run.
You are going to invest for a long time, so you don’t have any idea what your money will do the next day or next year.
Borrowed money is like our Liabilities. Don’t liabilities to Buy Assets.
Only put the money you have saved and that you don’t need in the near future.
11. Think Independently and invest Independently
Do not get influenced by the opinion of other people. When it comes to investment, everyone has advice ready for you.
Don’t bother too much about the advice and tips of other people.
Think and work independently to invest Independently. Independent thinking is the quality of highly successful investors in the world.